Buy-to-let mortgage - single or joint for tax purposes?

Walletwatch

Hi

We currently live in an apartment that is in my name, with the mortgage also in my name. We've recently had an offer accepted on a house that we are upgrading to. The idea is to retain the current apartment and let it out. While moving over the mortgage on the current apartment, if I were to convert the mortgage to a joint one (my wife and I), would I be able to attribute 50% of the rental income from this property to my wife's lower tax bracket? Or would this only be possible if the apartment itself is also jointly owned?

Cheers
WW

amnblog

If your wife is not involved in the ownership it's not her income.

Consult an accountant.

Walletwatch

Hi

A further update. Spoke to my mortgage broker, and his suggestion was that if I wanted to get a joint mortgage on my BTL property, i could. As part of this, there would be additional legal fees of £250, which will also cover transferring part-ownership of the property to my wife's name. The lenders would use one of the solicitors on their panel to get this done. This would potentially solve my above problem.

I do have a few questions though, which my mortgage broker couldn't address (obviously given taxation / law is not his area of expertise):

1. Would there be stamp duty implications if I included my wife as part-owner of the property?
2. Would I have to get into the messy affair of sending across original title documents and other stuff by courier to and fro, thus leading to risk of loss of documentation / delays / etc?
3. Like all other legal fees, would this also be only an indicative figure (the £250 quote), and in reality, could much exceed the nominal value?
4. Since the priority here is to exchange and complete at the earliest and move to my new place before I can let out my current residence, would this introduce further inordinate delays in the overall process?
5. After doing all of this, would I still be able to achieve my original objective, i.e. having part of the rental income declared at my spouse's lower tax rate?

Cheers
WW

holly_hobby

Walletwatch wrote: »

I do have a few questions though, which my mortgage broker couldn't address (obviously given taxation / law is not his area of expertise):

1. Would there be stamp duty implications if I included my wife as part-owner of the property?

If your current o/s BTL mge is below 250k - and this is the only consideration involved in the transfer of equity, then no. This is because the consideration of wife to you would be assumed as 50% of the os mge, and as SDLT kicks in at 125k, if its below 250k then no SDLT. If the os mge does exceed 250k, then yes there will be SDLT.

Walletwatch wrote: »

2. Would I have to get into the messy affair of sending across original title documents and other stuff by courier to and fro, thus leading to risk of loss of documentation / delays / etc?

Its all electronic with land registry, but yes you would need to sign the appropriate conveyencing forms effecting the transfer of equity from you to wife.

Walletwatch wrote: »

3. Like all other legal fees, would this also be only an indicative figure (the £250 quote), and in reality, could much exceed the nominal value?

Possibly, TOE is usually circa £450 (of course this may vary nationally) plus lender admin fees.

Walletwatch wrote: »

4. Since the priority here is to exchange and complete at the earliest and move to my new place before I can let out my current residence, would this introduce further inordinate delays in the overall process?

Not necessarily - it can all be done sequentially, but best laid plans and all that !

Walletwatch wrote: »

5. After doing all of this, would I still be able to achieve my original objective, i.e. having part of the rental income declared at my spouse's lower tax rate?

Cheers
WW

Yes, you effect the transfer of equity under a tenants in common arrangement, where you can UNEQUALLY apportion legal ownership of the property.

You would obviously weight this in favour of Mrs, say 99/1 or whaterver, as this is the divsion of rental income that will be reported and liable to income tax with HMRC.

With regards HMRC you complete and submit Form 17 -http://www.hmrc.gov.uk/forms/form17.pdf
to advise of the unequal division of ownership and rental income (otherwise as a married couple HMRC will assume rental income is split equally ie 50/50, which won't help your tax issue).

With regards to mortgage deductions, please take note that its only mortgage interest that is a permitted deduction from rental receipts.

Discuss with your accountant the other permitted deductions, such as management and utility maintenance fees, professional fees, essential repairs, etc, etc,

Hope this helps

Holly

begtodiffer

My situation is sufficiently similar so I'd like to ask my question here.

- I have say 120k equity in and mortgage on current property where wife & I have lived for over 10 years.
- Wife owns a small flat in her name and derives some £100s of income monthly from letting this which is her only income. She also has enough spare capital for a 40% deposit on another BTL.

Now we want to buy any next BTL in joint names, to leverage her capital and my income as ammo for the application.
First hurdle: The BTL lenders I so far approached seem to demand that BOTH applicants for a joint mortgage are currently paying a mortgage! But it's all in my name and wife does not have her name on any mortgage.

One lender said I could do the whole thing in my own name.
Not acceptable - wife wants her name on the deeds of the new BTL as she's stumping up most of the deposit - and I agree.
On top of that, I want ownership to be 50/50 so I am only liable, at my quite high marginal tax rate, for half of any profit after interest and costs.

The really big name lenders are already out of the picture due to earning criteria (e.g. wanting to see a joint income of £90k!).

Offers so far have been in the 5-6% interest rate ballpark if it weren't for the above block - I don't want to pay more than that.

Anyone been here - any suggestions?

Thrugelmir

begtodiffer wrote: »

Anyone been here - any suggestions?

With no income and other tangible security then leveraging with debt won't be possible. Those hazy days of easy lending days are over.

amnblog

begtodiffer wrote: »

Anyone been here - any suggestions?

Yes, pay a broker to get some proper advice.